R&D Tax Credits Explained

 

Research and development tax credits are a tax relief designed to encourage greater R&D spending and investment in innovation. They work by either reducing your company’s liability to corporation tax or giving you a cash payment.

There are two schemes for claiming relief:

  1. Small or Medium-sized Enterprise (SME)
  2. Research and Development Expenditure Credits (RDEC)

R&D will qualify under either scheme if you attempt to overcome scientific or technological uncertainties at your own risk.

Easy R&D focus on the SME scheme where up to 33% of the qualifying R&D costs can be set against corporation tax. You can backdate claims up to two years from the end of your accounting period.

Easy R&D are a member of HM Revenue & Customs’ (HMRC) R&D Consultative Committee – we bridge the expertise gap between the average accountant and a national, multi-region practice.

The company works on a contingency fee basis so there is no risk to engage us. Take advantage of our technical and specialist tax experience to maximise R&D tax relief claims with the Easy R&D Claim Portal.

Our 5 Easy Steps claim process combines meeting an Easy R&D Consultant with our Claim Portal convenience. We guide you through the information needed for your claim. You can provide this online in the Easy R&D Claim Portal in your own time and at your own pace.

A R&D Consultant will visit you to discuss qualifying criteria for your R&D tax relief – namely company, activity, project and costs.

 

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Does your company qualify?

 

Your company will be counted as a HMRC SME if it has fewer than 500 staff. Additionally your firm’s turnover needs to be less than €100 million and have gross assets of less than €86 million. Fortuitously this is double the more widely used European Union SME standard definition.

Is your company part of a group? If so, you’ll need to check the SME limits are not exceeded. HMRC treat all companies worldwide in a group as a single economic entity.

business meeting with laptop

What counts as R&D activity?

 

Your R&D will qualify if you try and overcome scientific or technological uncertainties, through creating new or significantly enhanced products, services, software or processes. You can also count R&D where you copy and improve a competitor’s product. However detailed information concerning your R&D cannot already be publicly available or deducible by a competent professional in the field.

About your R&D project

 

Make your project identifiable with a clear objective and a start and end date. If the project spans multiple accounting periods then qualifying costs in each period will be set against the corresponding corporation tax via a HMRC CT600. Your R&D project also needs to be at your own risk (you pay) and it doesn’t matter if the project succeeds or fails.

What costs qualify for tax relief?

 

Your R&D costs are important to justify and and determine the size of your R&D corporation tax relief. The key qualifying costs are summarised below.

  • Staff Costs – Apportion your employee costs (salary, national insurance and employer pension) for their time spent on the R&D project. You can also count reimbursed R&D business expenses.
  • Software – Include any software purchased for R&D purposes. Apportioned costs if there is any subsequent use.
  • Subcontracted R&D – Claim 65% of what you paid your R&D subcontractor.
  • Utilities & Consumables – Add up water, fuel, power and material used in the project.
  • Prototypes – Include all R&D prototypes.

How much can I claim?

 

Add up your eligible costs and if this is your first claim you’ll have the opportunity to cover the last 2 accounting periods. Your claim could be worth up to 33% of these total R&D costs assuming all the criteria for R&D tax credits have been met.

The Easy R&D average claim size is around £50,000 with over 1,000 claims processed and a 100% success rate.

If you still have more questions or need further clarity n the R&D tax relief scheme, you can find more information on on our FAQs page.
 

Interested in claiming R&D tax credits?

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